Spread Cost Calculation: How to Find Effective Spread and Compare Commissions
When someone says the spread is a certain number of pips, do you know what it actually costs?
In short, multiply the spread (pips) by the value of 1 pip and the number of lots, and you get the cost as an amount. The amount after subtracting cashback is the effective spread.
This article shows the calculation steps and how to compare with commission accounts, using sample figures.
In short: effective spread = spread cost − cashback
- Spread cost = spread (pips) × value of 1 pip × lots
- For a commission account, add the commission to the spread to get the total cost
- The amount after subtracting cashback is the effective cost
- Cashback amounts are not confirmed, so all amounts in this article are assumed examples
How to convert spread into an amount
The spread is the difference between the bid and ask prices. It is hard to judge in pips alone, so convert it to money to compare.
- 1
Find the value of 1 pip
For EUR/USD, 1 pip on 1 lot is about 10 USD. For USD/JPY, it is about 1,000 yen.
- 2
Multiply by the spread
If the spread is 0.7 pips, 0.7 × 10 USD is 7 USD.
- 3
Multiply by the number of lots
For a 0.5 lot trade, 7 USD × 0.5 is 3.5 USD.
| Spread | Cost for 1 lot (EUR/USD) | Cost for 0.1 lot |
|---|---|---|
| 0.2 pips | 2 USD | 0.2 USD |
| 0.7 pips | 7 USD | 0.7 USD |
| 1.0 pips | 10 USD | 1 USD |
What is the effective spread after cashback?
The effective spread is the spread cost minus cashback. Converting back to pips makes it easier to compare.
For example, if you assume 3 USD per lot comes back, that is 0.3 pips on EUR/USD. A 0.7 pip spread becomes an effective 0.4 pips.
| Item | Amount (1 lot, example) |
|---|---|
| Cost of a 0.7 pip spread | 7 USD |
| Cashback (assuming 3 USD per lot) | −3 USD |
| Effective cost | 4 USD (effective 0.4 pips) |
How to think about comparing with commission accounts
A commission account has tighter spreads but charges a trading commission. Add the spread cost and the commission together to compare.
According to official information, the Axi Premium account has spreads from 0.0 pips with a $4.5 round-turn commission. Exness's Zero account has a commission from 0.05 USD per lot, one way.
| Account type (example) | Spread cost | Commission (round turn) | Total |
|---|---|---|---|
| No commission, 0.7 pips | 7 USD | 0 USD | 7 USD |
| With commission, 0.0 pips (Axi Premium) | 0 USD | 4.5 USD | 4.5 USD |
The commission calculation depends on whether it is one way or round turn. Exness's one-way 0.05 USD from works out to 0.10 USD from for a round turn.
Steps to choose an account by effective cost
- 1
Convert the spread to an amount
Work out the cost per lot for the currency pair you trade most.
- 2
Add the commission
For a commission account, add the round-turn commission.
- 3
Subtract the cashback
Subtract the cashback amounts posted on each broker page and compare the effective costs.
- Spreads can widen depending on the time of day and market conditions
- How easily orders are filled (slippage) also affects your effective cost
- Cashback may be taxable income (check with a tax accountant or the tax office)
Estimate how much you get back and your effective cost from your trading volume.
Use the cashback calculatorFAQ
Q.How much does a 1 pip spread cost?
For EUR/USD it is about 10 USD per lot, and for USD/JPY about 1,000 yen per lot. Multiply by the number of lots traded to get the actual cost.
Q.What is an effective spread?
It is the actual trading cost after subtracting cashback from the spread cost. Converting it to pips makes it easier to compare with other accounts.
Q.Which costs less, a commission account or a spread-only account?
It depends on the currency pair you trade and the measured spreads. Add the spread cost and the commission, subtract the cashback, and compare.
Sources
- Axi Trading Accounts (commissions and spreads) (checked 2026-09-10)
- Exness Help Center (account types) (checked 2026-09-03)
This article is for information purposes only and is not investment advice. Conditions may change, so please check each broker's official page for the latest information. Offshore FX and CFD trading carries a risk of losses exceeding your principal.
